Zacks_Analysts' Blog : 3M Reports Above Estimate - Analyst Blog

3M Company (MMM) announced fourth-quarter 2011 results before the market opened today, reporting earnings per share of $1.35, above the Zacks Consensus Estimate of $1.31 per share. Earnings per share surged up 5.5% year over year.

For full year 2011, earnings per share were $5.96, above the Zacks Consensus Estimate of $5.93 per share and 5.9% above prior-year earnings.

Total Revenue

Total revenue in the quarter increased by 3.3% year over year to $7.1 billion. Acquisitions contributed 2.3% to total growth, foreign exchange added 0.1%, organic volume growth 1.3% and higher year-on-year selling prices added 2.0%. Sales growth in Latin America/Canada at 9.7% was strongest in the quarter. US sales increased by 7.4%.

For 2011, total revenue was $29.6 billion, an increase of 11.1% year over year. Sales in the year was led by growth in five out of six business segments of the company.

Segment Results

Sales increased in all segments of the company, except Display and Graphics and Electro and Communication segments.Display and Graphics salesdeclined by 8.8% to $823 million, primarily due to declined sales of optical systems. Electro and Communication revenue was $768 million, down 2.7%, primarily due to declined sales of consumer electronics.

The Industrial and Transportation segment witnessed highest growth of 14.3% amounting to $2.4 billion, led by double-digit sales growth of abrasives, aerospace, industrial adhesives and tapes, energy and advanced materials and automotive.

Safety, Security and Protection Services revenue increased by 9.4% to $927 million, led by sales increase in security systems and personal security as well as growth in building and commercial services.Consumer and Office revenue was $1.0 billion, up 6.1% attributable to positive growth in DIY, home care, office supplies and stationery products businesses. Healthcare sales increased by 5.4% to $1.3 billion.

Income and Expenses        

Operating income, for the quarter, was $1.36 billion compared with $1.31 billion in the prior-year quarter. Selling and general expense was $1.52 billion compared with $1.45 billion in the prior-year quarter and research and development expense was $379 million compared with $388 million.

Balance Sheet

Cash and cash equivalents were $2.22 billion at the end of the year with long-term debt of $4.5 billion and shareholders equity of $15.86 billion.

Outlook

3M reaffirmed its full-year 2012 guidance, expecting organic sales growth of 2% – 5% and earnings per share in the range of $6.25 – $6.50. Operating income margins are expected to be between 21% – 22.5%.

The company expects to see a slow growth in the first half of 2012, as weakening economies continue to challenge business growth. Investments in research and development (“R&D”), sales and manufacturing are targeted by the company to achieve accelerated growth.

3M is globally recognized for its innovations, which are supported by some of its well-known brands, such as Nexcare, Post-it, Scotch, Scotch-Brite, and Scotchgard. We believe that continued capital expenditure with new product launches should bolster its prospects across most end markets.

However, the company’s growth objectives are largely dependent on timing and market acceptance of its new product offerings, including its ability to continually renew its pipeline of new offerings and bring those to the market at acceptable price points. Further, the results have been impacted by worldwide economic and capital market conditions.

3M Company, together with its subsidiaries, operates as a diversified technology company with manufacturing operations spread over 60 countries worldwide. The major competitors of 3M are Avery Dennison Corporation (AVY), EI DuPont de Nemours & Co. (DD) and Johnson & Johnson (JNJ).

We continue to maintain a Neutral rating on 3M Company for the long term and a Zacks #3 Rank (Hold recommendation) over the next one to three months.